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Only One-Third of Americans Think They'll Pay Less in Taxes Under the New Laws

Will tax reform end up benefiting you? Here's why it just might.

Though tax reform has been upon us for quite some time now, most Americans are still learning to adjust to the new changes. But the outlook on the Tax Cuts and Jobs Act is hardly rosy. In fact, only one-third of working adults expect a tax break as a result of the new laws, according to recent data from Credit Sesame. If you're on the fence about this year's tax changes, or, worse yet, are convinced your personal bill will stay the same or go up, here are a few recently implemented benefits you should know about.

1. A higher standard deduction

The overwhelming majority of tax filers claim the standard deduction each year rather than itemize. If you're one of them, you're in for a huge tax break under the new laws. That's because the standard deduction has nearly doubled in 2018, going from $6,350 to $12,000 for single filers, and from $12,700 to $24,000 for joint filers. That's a major jump, and one that will no doubt come to benefit countless workers.

IMAGE SOURCE: GETTY IMAGES.

2. Lower tax brackets

Your tax bracket dictates the rate at which your highest dollars of earnings will be taxed, and the good news for filers is that this year, those rates have been reduced almost across the board. Here's what our tax brackets looked like for 2017:

Marginal Tax Rate

Single Tax Filer

Married Filing Jointly

10%

$0-$9,525

$0-$19,050

15%

$9,525-$38,700

$19,050-$77,400

25%

$38,700-$93,700

$77,400-$156,150

28%

$93,700-$195,450

$156,150-$237,950

33%

$195,450-$424,950

$237,950-$424,950

35%

$424,950-$426,700

$424,950-$480,050

39.6%

Over $426,700

Over $480,050

DATA SOURCE: IRS.

And here's what they look like today:

Marginal Tax Rate

Single Tax Filer

Married Filing Jointly

10%

$0-$9,525

$0-$19,050

12%

$9,525-$38,700

$19,050-$77,400

22%

$38,700-$82,500

$77,400-$165,000

24%

$82,500-$157,500

$165,000-$315,000

32%

$157,500-$200,000

$315,000-$400,000

35%

$200,000-$500,000

$400,000-$600,000

37%

Over $500,000

Over $600,000

DATA SOURCE: IRS.

So let's say you're a couple filing jointly earning $200,000. Under the old brackets, you'd pay 28% on your highest dollars of income. Under the new brackets, however, you'll pay just 24%.

3. A more generous -- and accessible -- Child Tax Credit

The Child Tax Credit offers money back to families with children under age 17. Up until this year, however, higher earners weren't eligible for the credit because it phased out at relatively low income levels: $75,000 for single filers, and $110,000 for couples filing jointly. But under the new laws, these thresholds are increasing to $200,000 and $400,000, respectively, which means that more families will no doubt manage to capitalize on the credit. Not only that, but the credit itself has gone up from $1,000 in previous tax years to $2,000 per qualifying child beginning in 2018. And unlike tax deductions, which simply exclude a portion of your income from taxes, a tax credit will directly reduce your tax liability in the amount it's worth. That means if you have two children and snag a $4,000 credit, your taxes will instantly go down by that much.

4. Deductions that carried over

Though a number of key tax breaks met their demise at the end of last year, the good news is that plenty remain intact. Take the mortgage interest deduction, for example, which is still very much alive and well, albeit at a lower threshold (you can deduct your interest in full on a new loan worth up to $750,000, down from $1 million in previous tax years). Additionally, you're still allowed to deduct state and local taxes (albeit at a $10,000 limit), charitable contributions, and medical expenses that exceed 7.5% of your adjusted gross income. In fact, if you're itemizing on your return this year, there's a host of deductions you might be eligible for, so don't assume the worst.

Though most Americans aren't sold on the fact that they'll benefit from tax reform, clearly, there's a lot to be gained by the recent changes. So if your negativity or ambivalence stems somewhat from the fact that you don't fully understand the new laws, my colleague Matthew Frankel does a bang-up job summarizing 2018's tax changes. Give his piece a read, because the more you educate yourself on the latest version of the tax code, the more positive your outlook might grow.

Author

Maurie Backman is personal finance writer who's passionate about educating others. Her goal is to make financial topics interesting (because they often aren't) and believes that a healthy dose of sarcasm never hurt anyone. In her somewhat limited spare time, she enjoys playing in nature, watching hockey, and curling up with a good book.